Kenya is considering allowing Islamic financial products as the east African country tries to tap into funding from the Middle East.
The effort by the Central Bank of Kenya comes two years after the country licensed its first Islamic banks. Gulf African Bank, the first Islamic bank in the country, has found its niche and was looking to capitalise on the call for new financial products.
Islamic or Sharia-compliant banking is a fast-growing segment of the financial sector in Kenya. Its principles include banking without giving or receiving interest payments and investing in Muslim-friendly enterprises.
Gulf African Bank, partly owned by the Dubai equity company Istithmar World, and First Community Bank, Kenya’s other Islamic lender, control 1 per cent of the banking sector’s net assets after less than two years of operation.
“This is a testimony of the vast potential of Islamic finance in Kenya, which should be tapped,” said Njuguna Ndugu, the head of the central bank. “Opportunities should be explored in the insurance and capital market segments using Sharia-compliant vehicles.”
Mr Ndugu spoke this month at the second East and Central Africa Islamic Finance Conference in Nairobi. The central bank is clearing the way for the issue of Sharia-compliant bonds, known as sukuk. It is also exploring Islamic-based co-operative insurance or takaful.